If the view taken by the A.O. is clearly plausible in law, it cannot be displaced in a revisionary proceedings by a very untenable or a debatable view.

Loading

If the view taken by the A.O. is clearly plausible in law, it cannot be displaced in a revisionary proceedings by a very untenable or a debatable view.

ANILRAMBHAI MEVADA & ANR. vs. PRINCIPAL COMMISSIONER OF INCOME TAX & ANR.
(2021) 63 CCH 0311 AhdTrib
Short Overview of the case:
It was a case of Revision power of CIT as to Order erroneous or prejudicial to revenue
In this case, Assessee along with other erstwhile co-purchasers entered into banakhat agreement with seller whereby seller had agreed to sell and transfer land parcel in favour of proposed purchasers on fulfillment of terms and conditions of banakhat/MOU
A part consideration was paid
No ownership right was vested or possession was given to assessee
Transfer of impugned land parcel was ultimately effected in favour of N by land owners and sellers
Registered sale agreement however, has admittedly recognised assessee and other two erstwhile co-purchasers as ‘confirming parties’ to facilitate a peaceful transfer of land parcel in favour of ultimate purchasers
Assessee and other two co-purchasers have received each as compensation for relinquishment of their right to sue demand to arise by virtue of erstwhile banakhat
Assessee has offered compensation so received in capacity of a confirming party on sale of land parcel under head ‘capital gain’
A.O. ascertained quantum of capital gains declared by assessee and assessed income offered by assessee without any adjustments or realignment
PCIT in exercise of revisional powers has directed A.O. to make property enquiries and verifications denovo on issue
On the revisionary power of CIT, ITAT Held as under:
Assessee has filed relevant evidence before A.O. to substantiate existence of gain arose to him
Only issue in dispute is towards nature and character of such gains arising to assessee
It is case of PCIT that gains arising to assessee ought to have been taxed under head ‘income from other sources’ instead of ‘capital gains’ offered by Assessee
Source of money received is manifest
Assessee has sufficiently demonstrated that gains arising to him is having live and direct nexus to banakhat agreement executed way back in August 2008 and sale deed executed in Feb. 2015 and such compensation/ gains has arisen to assessee in recognition of rights of Assessee to sue in land parcels which falls under definition of ‘capital asset’, relinquishment of which is taxable as capital gains under S. 45
Assessee was paid compensation along with other co-purchasers when final sale deed was executed in consideration of release of rights arising to him by Banakhat
Hence, seller and ultimate purchaser have, rightly or wrongly, perceived strength of such banakhat under general laws and in order to bring quietus to any potential dispute, have taken these co- purchasers onboard as confirming parties, as advised to them
Compensation awarded to assessee and co-purchasers naturally have direct connect with such subsisting rights perceived by sellers and purchasers
Compensation so received on release of such right, at best, falls within ambit of expression of ‘capital asset’ defined in section 2(14—Pertinent to note, expression ‘capital asset’ as defined in section 2(14) of very wide import and connotation
There is no potency in claim of PCIT that such income is chargeable under head “income from other sources” more so, in exercise of revisional jurisdiction which debars revisional authority to interfere with a legally plausible view taken by A.O
Stand of PCIT prima facie appears to be quite slender and plainly contrary to law and facts of case—Significantly, it is not for revenue to determine as to whether assessee is entitled to any compensation on a conceivably unenforceable banakhat agreement or otherwise
It is trite that revenue cannot step into shoes of contracting parties to determine expediency of payment
Where seller and purchasers have consciously decided to pay compensation for relinquishment of right arising from an erstwhile banakhat and suitable clause to this effect was put up in registered sale deed, revenue cannot displace legal effect of such express terms duly registered
In factual matrix, gains arising by virtue of such arrangement is either chargeable under head “capital gains” or not chargeable at all
There is no scope for bringing such income to tax under head ‘income from other sources’
It must be borne in mind that scope of powers under revisionary jurisdiction are not unfettered
Whereas A.O. had rightly endorsed corroborated claim of assessee in this regard, PCIT, has attempted to substitute his wisdom by views of A.O. without any definite basis
If view of PCIT towards banakhat allegedly hollow or unenforceable is accepted, no income can be recognised at all
View taken by A.O. is clearly plausible in law and could not have been displaced in a revisionary proceedings by a very untenable or a debatable view
Having come to a conclusion that income should be taxed under had ‘income from other sources’ it was not open to PCIT to direct A.O. to make enquiries and verifications without keeping issue open for him to be determined afresh
It is evident that issue was foreclosed in revisional order itself and A.O. was simply directed to follow dotted lines in garb of lack of proper enquiries or verifications
PCIT has also failed to spell out as to what further enquiry or verifications are required to be made independently where all evidences are already perused
Manifestly, revisional order does not pass test of prerequisites of jurisdiction embedded in section 263
PCIT has failed to demonstrate any perceived error in assessment order
Assessee’s appeal allowed.
Menu